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Friday, June 18, 2010

From Seizebp.org: What does the BP "escrow" deal really mean? by gimleteye

It is extraordinary -- but perhaps not unexpected-- how little analysis the mainstream media has done on the $20 billion deal hammered out at the White House with BP for an 'escrow account' to compensate victims of the worst environmental disaster in US history. The website, Seize BP, has done a good job looking at details in the deal that point to further questions. Click 'read more' for the full text from its website.

As we enter the second month of this catastrophe, some readers are tiring of my persistent focus on this issue. The fatigue is understandable. I feel it, myself. But I am compelled back to the subject and reminded why, by the response of a local county commissioner in Miami-Dade, Katy Sorenson, to the question: "Do you think the economic crisis has changed anything at the county commission?" Her answer, "No," is true and tragic. I am afraid the same may be true of the Gulf Oil disaster: that people will recoil, then accept the massive damage to the economy and to families and the environment. This sense of helpless and failure to act seems so antithetical to democracy. Americans will learn-- as Nigerians have in the oil fouled Delta-- to suck up to a badly degraded and damaging quality of life based on the need for oil. We did it with the costs of suburbia. With the costs of water pollution. Why not, oil ringing the State of Florida like a filthy bathtub?

People all around the country have put so much pressure on the Obama administration that it had to “do something” to look like it was standing up to BP. The announcement today of a so-called $20 billion escrow fund from BP would never have happened without mass pressure. But does this fund truly respond to the needs of the people in the Gulf Coast states?

Too much is at stake for people to let down their guard and accept the “feel good” sound-bite version of what took place today in the meeting between President Obama and BP’s executives.

The White House and BP are creating a mythology, or "spin," on what the tentative agreement signifies.

It is noteworthy that BP's executives are very happy with the new agreement. Their necessary goal as a corporation is to maximize profits, and not to pay damages to all of those who have been harmed. As the Washington Post reported after the meetings, "Behind the scenes, the company had signaled what it expected from Wednesday's meeting—and the company appears to have gotten exactly what it wanted."

It is quite clear to us, even though much more will be revealed in the coming days and weeks, that we have to accelerate the movement for justice. This agreement is not only inadequate but attempts to shield BP from paying all the damages and compensation for lost work, ruined small businesses, and a devastated ecosystem.

At first glance, one would believe, based on the headlines that the Obama Administration compelled BP to set aside $20 billion dollars in an escrow account to meet the needs of people and communities harmed by BP's criminal negligence.

But this is actually a great deal for BP.

The facts on the "escrow" account

The "escrow account" in 2010 is not $20 billion dollars. BP will put in $3 billion dollars in the third quarter of 2010 (ending September 30) and another $2 billion in the fourth quarter (ending December 31). Thereafter, it will have to make installments of $1.25 billion each quarter for the next three years.

This means that the necessary money will not be available to pay the tens of billions in losses that are real and immediate. It also means that people and businesses will have to get in line.

The real number for the escrow account in 2010 is $5 billion—six months from now at the earliest. To put this in perspective, BP has been bringing in between $26 billion and $36 billion annually in profits on revenue of $250 billion, and pays out more than $10 billion in dividends yearly.

According to a report in Forbes, BP could absorb $35 billion in spill costs before it would have a "material impact" on its operations. But instead, it will be allowed a paltry $5 billion a year, in an installment plan over four years.

Another measure of perspective can be had by comparison of this $5 billion per year voluntary set-aside to the accumulated potential fines and penalties under the Clean Water Act. BP can be fined $4,300 per barrel of oil spilled as a consequence of gross negligence. With the recent acknowledgment that the spill volume is 60,000 barrels per day, that is a potential penalty of over $250 million per day. Put another way, every 60 days accumulates a potential $15 billion fine under the Act. The voluntary arrangement to set aside $5 billion per year is meager in comparison.

This, of course, reflects Obama’s unwillingness to exercise legal authority against BP. Department of Justice lawyers could be initiating prosecutions for the accumulated fines, but aside from the announcement of potential investigations, this has not occurred.

Obama denies that his deal with BP will function as a cap on its liability, but this remains to be determined. The deal appears to functionally provide a shield for BP. As one investment advisor told the Wall Street Journal, the agreement puts "an end to the financial bleeding," and allows investors to assess what BP's total liabilities might be. So while President Obama stresses that the plan is not a cap on liability, it certainly appears as one. The installment terms of the payments themselves limit the amounts that will be made available while people are seeking claims.

Mr. Feinberg to the rescue—again

President Obama announced that the fund will be administered by Kenneth Feinberg, a Washington lawyer who made $5.7 million in his law practice in 2008. Mr. Feinberg has played a particular role in Washington at the time of virtual uprising against the banks and bankers' bonuses. He was appointed to be the “pay czar” by Obama reviewing and approving many of the obscene bonuses doled out to AIG and other executives after they were bailed out with hundreds of billions of dollars of taxpayers’ money. As Reuters wrote today, "He has been hailed for soothing the egos of Wall Street executives clutching on to big paychecks, while still looking tough to a general public shocked by massive payouts to firms on a government lifeline."

There is very little other information about how claims will be processed. There will have to be determinations made as to what, in the parlance of both BP and President Obama, is a "legitimate" claim. While Obama stated that anyone can file a claim, that doesn’t mean that the claim will be accepted or paid. Nor does it appear that the decision-making process will include any of the affected Gulf coast residents or their representatives from the fishers, shrimpers, crabbers, unions, small business people and workers in the tourism and recreation industry, local elected officials, clergy, and independent scientists and environmentalists.

Details must be forthcoming about claims payments and standards. Can we expect tens of thousands of people to receive checks by the end of the month? One thing is clear: The limited level of the fund necessarily means that claims cannot be paid equivalent to the damages incurred right now.

The creation of the so-called escrow fund was the result of a nationwide mass movement. Now is the time to step up our organizing to make sure that we have the kind of escrow fund that can really meet the needs of the people and repair the vast environmental damage caused by BP.

Quotes hall of fame - worth another look:

Jonathon Dunlop of Australia about the Miami Airport:"This is the most disorganized shambles of an airport that exists on this earth.''April 01, 2007 Eye on Miami Comment on Post__________________________________On "Colony Collapse Disorder":Anonymous said...I say lets wait till the last tree is going to be cut down, the last bit of oil used, the last lowland coastal areas flooded before we make any rash decisions that might effect the economy.April 21, 2007 Eye on Miami Comment_________________________________On Bee “Colony Collapse Disorder” being blamed on cell phones:Anonymous said...Hmmm. What are bees doing with cell phones, anyhow?April 20, 2007 Eye on Miami Comment_________________________________On South Florida Water Supply:Ron Littlepage said...Unfortunately, we know who would win when it comes to allowing development to run amok and it's not the wildlife.April 20, 2007 Eye on Miami Comment Post_________________________________Lesley Blackner said:In Florida, the sad reality is that government exists to serve the development machine, not the citizenry. That's why it's proper to say that in Florida we have government of the developer, by the developer and for the developer.April 22, 2007 Eye on Miami Post_________________________________On City of Miami and Miami Dade County giving $1,000,000 each to Jorge Perez’s Related Group (The Group's 2005 revenues were $3.25 billion.):"It makes as much sense as me donating half my paycheck to Warren Buffett.”May 6, 2007 Miami Herald Columnist Ana Menendez_________________________________On the FCAT Test:"'Florida is a serial mis-user of test scores.''Bob Schaeffer, director for Massachusetts-based FairTest.May 25, 2007 Miami Herald_________________________________Clifford Schulman (Greenberg Traurig Lobbyist):"This is the first time in 33 years that any one has accused me of fraud." June 28, 2007 Miami HeraldI say: hmm.__________________________________Max Rameau, Homeless Activist:"I respect Ron Book for his work with the Homeless Trust, but the Liberty City community and others have given broad support to this idea. I don't know that a big-time millionaire lobbyist can tell us what is best for Liberty City and the black community.'' July 28, 2007 Miami Herald__________________________________"After years of mismanagement under a board of political appointees and neighborhood activists, Miami-Dade County administrators have proposed a new way to run the troubled empowerment zone program. The plan: Bring in new political appointees and neighborhood activists."November 6, 2007 Miami Herald: Reporter Scott Hiaasen______________________________________"Saying "Greater Everglades" and "Northern Everglades" is not saying Everglades -- other places are deserving of being protected too, but there is only one Everglades. The main thing is to keep the 'Main Thing' the main thing -- which, lately, has not been the main thing." Bob Mooney - on Listserve "Everglades Commons"________________________________________"Does anyone in their right mind believe that Florida could conduct postal balloting without a major screw-up or scandal? Heavens, no! The whole country is keenly aware that our state is a sump hole of incompetence and corruption."Carl Hiaasen - March 16, 2008 Miami Herald_______________________________________On the Charter Review: "Commissioners want us to vote on their own pet changes, ideas the review team explicitly rejected. And, they're throwing their blatantly self-serving ballot questions at us at the same time. What a slap in the face to the charter review team — and to all of us!" Michael Lewis of Miami Today - April 10, 2008______________________________________On the Miami Dade County Commission:''Unfortunately, this is a commission that would build a cyanide factory next to a playground if you hired the right 12 lobbyists,'' Miami Lakes Councilman Michael Pizzi - May 14, 2008______________________________________"The days where we’re just building sprawl forever, those days are over. I think that Republicans, Democrats, everybody recognizes that that’s not a smart way to build communities." President Barack Obama in Fort Meyers - February 10, 2009______________________________________"So."Dick Cheney's response when told that two thirds of Americans did not support the war in Iraq. - Time Magazine 2008______________________________________"It seems like a bad idea can always find a home in the Florida Legislature." - Howard Simon - Executive Director of Florida ACLU - March 24, 2010

______________________________________Complete this sentence: South Florida really needs a..."Regional plan for controlled growth (before it becomes a concrete jungle similar to Houston), and a completely new set of elected officials that make decisions based on what's good for the future of South Florida instead of what's good for their wallets. - Jack McCabe, Real Estate expert who predicted the housing boom's end. - August 29, 2011 Miami Herald